Posted On Tuesday, March 4, 2014
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On Friday, Citigroup Inc. announced that it was downwardly adjusting its 2013 financial results by $360 million due to a recently discovered fraud affecting a Mexican subsidiary. Citigroup’s disclosure stated that its subsidiary, Banco Nacional de Mexico, known as Banamex, had made $585 million in short-term accounts receivable loans to Oceanografia S.A. de C.V. (“OSA”), a Mexican oil services firm. Citigroup now reports that the account receivables that served as the basis for those loans were fraudulent.
According to Citigroup, until February 2014, it believed that OSA was an approved supplier to a Mexican state-owned oil company, Petróleos Mexicanos. Based on OSA’s representation that it was an approved supplier, it obtained approximately $585 million in accounts receivable loans from Citigroup over the past several years and, at the close of 2013, had $33 million in loans outstanding to Citigroup.
On February 11, 2014, however, Citigroup learned that OSA was barred from being awarded new contracts with the Mexican government, leading Citigroup to investigate the loans made to OSA in recent years. The investigation revealed that many of the accounts receivable claimed by OSA to backed by accounts with Petróleos Mexicanos were fraudulent and worth substantially less than the $585 million loaned to OSA. In fact, only $185 million of the $585 million loaned to OSA was supported by actual accounts receivable. This $400 million difference led Citigroup to downwardly adjust its full year 2013 and fourth quarter 2013 financial results by an estimated $235 million after taxes and $360 before taxes.
Yesterday, in an annual filing with the SEC, Citigroup reported that it and Banamex have received subpoenas from the FDIC and the U.S. Attorney’s Office for the District of Massachusetts related to compliance with the U.S. Bank Secrecy Act and other federal anti-money laundering requirements. Citigroup indicated it is complying with the subpoenas.
Posted On Tuesday, March 4, 2014
Pietragallo Gordon Alfano Bosick & Raspanti, LLP is pleased to announce that Kevin E. Raphael has been appointed Co-Chair, along with James W. Kraus, of Pietragallo’s newly renamed Government Enforcement, Compliance, and White Collar Litigation Practice Group.
Mr. Raphael, a former sex crimes prosecutor, frequently counsels a variety of institutional clients, including medical facilities, educational institutions and corporations, concerning the investigation of, and response to, allegations of sexual misconduct. In addition, Mr. Raphael provides training and compliance advice to educational facilities concerning Title IX and Clery Act compliance. Mr. Raphael conducts investigations for educational institutions pursuant to Title IX obligations as well as internal investigations in response to allegations that an institution’s policies and procedures were inadequate. Further, Mr. Raphael handles a wide variety of white collar criminal cases across the country, including Health Care Fraud, Medicare and Medicaid Fraud, Food and Drug Administration (“FDA”) criminal investigations and numerous public corruption cases.
Mr. Raphael speaks and writes extensively on white collar and health care litigation issues, including fraud and abuse and compliance. Mr. Raphael serves as an Adjunct Professor of Health Law at Widener University School of Law.
Mr. Kraus concentrates his practice in the areas of white collar criminal defense and internal investigations, health care litigation, and financial services litigation. He has more than 20 years of civil and criminal trial experience in both state and federal courts, covering a broad range of substantive legal areas. He is admitted to practice in Pennsylvania, West Virginia, Ohio and the District of Columbia. In addition to his work in the courtroom, Mr. Kraus has conducted numerous internal investigations for corporate clients. Prior to entering private practice, Mr. Kraus served as an officer in the U.S. Army Judge Advocate General’s (JAG) Corps, including time as a criminal prosecutor with the Army’s 4th Infantry Division.
Mr. Kraus has been named a Pennsylvania Super Lawyer in the area of White Collar Criminal Defense. He serves as Chair of the Defense Research Institute (DRI) Government Enforcement and Corporate Compliance Committee (GECC). He also serves as Co-Chair of the American Bar Association’s (ABA) Criminal Justice Section White Collar Crime Committee Mid-Atlantic Region Subcommittee. Mr. Kraus also serves as a guest lecturer and subject matter expert for Carlow University’s Masters of Fraud and Forensics program, and is the principal architect and frequent contributor to White-Collared.com, the blog of Pietragallo’s Government Enforcement, Compliance, and White Collar Litigation Practice Group.
